Conservative super funds

What is a conservative super fund?

A conservative super fund is one that has less money invested in growth assets, such as shares, and more money invested in defensive assets like cash and bonds. Unlike a high growth super fund, a conservative super fund is designed to protect your super balance instead of aggressively grow it.

By investing more heavily in low-risk assets like cash, term deposits and bonds, a conservative super fund still delivers a small level of growth but without much volatility. The investment returns will be much lower than those achieved by balanced and high growth super funds, but your balance also won't fall by as much during periods of market volatility.

Conservative vs balanced super funds

The difference between a conservative and balanced super fund is the fund's asset allocation. Conservative funds allocate much less money towards high-risk assets like shares. A balanced fund is generally the default option offered by the super fund and the one you'll be invested in when you first join the fund.

Generally, conservative super funds as those with less than 40% of their asset allocation in growth assets like shares. If the fund has between 60 to 80% of its money invested in growth assets, it would instead be a balanced or growth fund. If it has more than 80% to 90% invested in growth assets, it'd be a high growth option.

Expert insight

"Conservative funds are best suited towards investors with a low risk capacity or tolerance, such as a retiree living off the returns generated from their super. "

Terry Vogiatzis

Founder and Director of Omura Wealth Advisers.

Different types of conservative super funds

There are two main ways you can invest in a conservative super fund.

Diversified conservative investment options

Most super funds offer a diversified conservative investment option as an alternative to their default balanced option. A diversified conservative fund still invests in a mix of asset classes like shares, property, fixed interest and bonds, but its allocation to shares is much lower than other options (learn more about superannuation investment options).

Conservative single-sector investment options

Most major super funds also offer a range of single sector investment options as well as diversified options. Single sector investment options only invest in the one asset class. Some conservative single sector investment options include cash, fixed interest or bonds.

Single sector investment options are designed for members who want to be a lot more hands-on with their super.

Should you switch to a conservative super fund?

Here are a few reasons why you might consider switching to a conservative super fund.

• You don't want to take on much risk.

If the thought of your super being invested in volatile assets like shares is going to keep you awake at night, you could consider a conservative super fund instead. However, you need to be prepared for much lower returns and, as a result, a lower super balance over the long term.

• You're close to retirement.

If you're a few years away from retirement, switching to a conservative super fund can be a good strategy. If you're going to access your super in a couple of years, you don't have much time for your balance to recover if there was a sudden market crash. If there is a market crash, your balance won't be as badly impacted in a conservative fund.

When you shouldn't switch to a conservative fund

If you're young (in your 20s, 30s and 40s), you have a lot of time to ride out any major market crashes. It's generally recommended that you keep your super invested in a balanced or high growth super fund while you're young (even up to your 50s!). You want your super to be growing as much as it can while you're young and working, and the longer it's invested in growth assets the longer you'll benefit from compounded investment returns.

It's also generally not a great idea to switch to a conservative super fund after a major market crash. If the market has already crashed, by switching out of a balanced or high gowth fund, you're just locking in that investment loss. Plus, if you're not invested in shares, you'll miss out on the growth when the market recovers (and the market always recovers).

How to switch to a conservative super fund

You can switch to the conservative investment option offered by your current super fund via the fund's mobile app or the online member portal. You can switch investment options at any time.

If you don't want to switch to the conservative investment option with your current super fund or if you don't have an existing super fund, follow these steps.

1. Choose your fund. Compare conservative super funds and choose the one you want to go with.
2. Join the fund. Join the super fund by completing the online membership application form.
3. Select the conservative investment option. During the application process, select the Conservative fund. If there's no option to do this during the application process, join the default option and then switch to the Conservative option as soon as your application is completed.
4. Consolidate your super. During the application process you'll have the opportunity to consolidate your super into your new Conservative super fund. To do this, just give the new super fund the details of your old super fund, and they'll bring over your balance for you.
5. Tell your employer. Give your employer your new fund details so they can pay your super into the right fund.

Frequently Asked Questions

• Should I put my super into conservative?

  You might consider putting your super into a conservative fund if you are close to retirement or prefer lower risk. Conservative super funds focus on preserving capital by investing in lower-risk assets, such as bonds and cash, but they also offer lower potential returns compared to growth funds.

• What are conservative funds?

  Conservative funds are investment options that focus on stability and capital preservation. They typically allocate a larger portion of the portfolio to fixed income securities like bonds, cash and other low-risk assets, making them less volatile but with modest returns.

• What is the average return on a conservative portfolio?

  The average return on a conservative portfolio typically ranges from 2% to 5% per annum, depending on market conditions and the specific assets held. These returns are generally lower than those of growth-focused portfolios, reflecting the lower risk associated with conservative investments.

Have you decided a Conservative super fund isn't what you're after? Learn about High-Growth super funds instead or take a look at our best super funds picks for a range of different options.

Written by

Alison Banney

Editorial Manager, Money

Alison is an editor at Finder and a personal finance journalist with over 10 years of experience, having contributed to major financial institutions and publications such as Westpac, Money Magazine, and Yahoo Finance. She is frequently quoted in media outlets like SmartCompany and SBS, offering expert insights on superannuation and money management. Alison holds a Bachelor of Communications in Public Relations and Journalism from the University of Newcastle, and has earned three ASIC RG146 certifications in superannuation, securities and managed investments and general financial advice, ensuring her expertise is fully aligned with ASIC standards. See full bio

Alison's expertise

Alison has written 644 Finder guides across topics including:

• Superannuation
• Savings accounts, bank accounts and term deposits
• Budgeting and money-saving hacks
• Managing the cost of living